Meet your wants and needs
When making a personal budget, it’s important to cover the essentials before making the most of what’s left.
A well-planned personal budget should be designed to ensure your financial security. But, if possible, you should also put aside some funds for fun.
The key to effective budgeting is to distinguish between essential and discretionary spending, then set your priorities accordingly.
Needs are essential expenses required for daily living. These include:
Housing: Mortgage or rent, council rates, utilities, home maintenance
Food: Groceries and basic household supplies
Healthcare: Medications, health insurance, medical appointments
Transport: Fuel, public transport, car maintenance
Insurance and bills: Home, car, and health insurance, phone, and internet.
Wants, on the other hand, are non-essential expenditures that enhance lifestyle but are not strictly necessary. These may include:
Dining out and takeaways
Travel and holidays
Entertainment and hobbies
Subscription services (streaming, newspapers, magazines, etc.)
Luxury items.
To manage finances effectively, you should develop a realistic and sustainable budget. Here’s how:
Begin by listing all sources of income, such as the Age Pension, superannuation withdrawals, investments, and any part-time work. Knowing your total income helps set spending limits.
Monitor where your money goes each month. Categorise expenses into needs and wants, identifying areas where you can reduce spending.
Ensure that all needs are met before allocating money to non-essential spending. Rent or mortgage payments, utilities, food, and healthcare should take precedence.
Setting aside money for unexpected expenses, such as medical bills or home repairs, is crucial. Consider maintaining a savings buffer or an emergency fund.
Limit non-essential spending. Enjoying life is important, but discretionary expenses should be managed wisely. Instead of frequent takeaways, consider home-cooked meals. Look for senior discounts and off-peak travel deals to save on leisure activities.
Financial needs change over time. Review your budget periodically to ensure it aligns with your current circumstances and goals.
Budgeting doesn’t mean sacrificing enjoyment, it’s about making informed choices. By focusing on necessities first and managing discretionary spending wisely, you can maintain financial stability while still enjoying life’s pleasures.
Planning ahead provides peace of mind and ensures a comfortable, stress-free retirement.
Disclaimer: This article and any links provided are for general information only and should not be taken as constituting professional advice. National Seniors is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how any information provided relates to your unique circumstances.
